Free Market

Topics: Externality, Market failure, Economics Pages: 3 (830 words) Published: October 10, 2013
A free market is a market structure which is not controlled by a designated authority. A free market contrasts with a controlled market or regulated market, in which government policy intervenes in the setting of prices. Is mainly a theoretical concept as every country, even capitalist ones, places some restrictions on the ownership and exchange of commodities. In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability. In simple terms, a free market is a summary term for an array of exchanges that take place in society. Each exchange is a voluntary agreement between two parties who trade in the form of goods and services. Just like supply-side economics, free market is a term used to describe a political or ideological viewpoint on policy and is not a field within economics. Advantages:

It contributes to political and civil freedom.
It contributes to economic freedom and transparency.
It ensures competitive markets.
Consumers' voices are heard in that their decisions determine what products or services are in demand. Supply and demand create competition, which helps ensure that the best goods or services are provided to consumers at a lower price.   Disadvantages

A competitive environment creates an atmosphere of survival of the fittest. This causes many businesses to disregard the safety of the general public to increase the bottom line. Wealth is not distributed equally - a small percentage of society has the wealth while the majority lives in poverty. There is no economic stability because greed and overproduction cause the economy to have wild swings ranging from times of robust growth to cataclysmic recessions.

Arguments for Government Intervention
1. Greater Equality – redistribute income and wealth to improve equality of opportunity and equality of outcome 2. Market Failure – Markets fail to take into account externalities and are likely to...
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